Microsoft Office’s Legendary Data Flywheel: Why A Superconsumer Of 1 Category Is Also A Superconsumer Of 9
Here's your treasure map.
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Dear Friend, Subscriber, and fellow Category Pirate,
In one of our mini-books, we wrote about how to leverage Superconsumers for growth and category creation.
“Supers” are not just the key to unlocking category potential in one category. Supers can actually help point to new vistas of opportunity—breakthrough ideas, hiding in plain sight. But without the category lens, most people can’t see them.
So pour up a drink, lads and lassies.
It’s time to go head into Superconsumer Cove (legend has it there’s buried treasure in there!).
Category Lens Calculus: A Super of 1 is a Super of 9
A Superconsumer is the kind of person who knows your category better than anyone else—and as a result, is willing to spend 30% to 70% more with you than other less enthusiastic customers. The analogy we like to draw here is that if you are a Super of Pink Floyd, you don’t just buy The Dark Side Of The Moon record once. You buy it maybe a dozen times: you have the original record, a few unopened CDs, various digital copies across different devices, some live bootlegs, as well as one or two remastered versions. You’ve probably also bought copies to give as gifts to friends. You might even have a lunch box (Pirate Christopher has a Ramones one).
As a result, your “value” as a customer is exponentially higher than a fleeting listener who bought the record or CD once and then moved on.
That’s what makes you a Superconsumer.
What doesn’t get talked about enough is how powerful Superconsumers can be in unlocking exponential growth for your business in adjacent categories. Or even not so seemingly adjacent categories.
The reason is because a Super of 1 category is also a Super of up to 9 other categories as well. Pirate Eddie’s prior consulting firm, The Cambridge Group, which was acquired by Nielsen in 2009, gave him access to a treasure trove of data. Specifically, the Nielsen Homescan Panel which had up to 100,000 households in the US (and more around the world) that had agreed to scan the receipt of every purchase their household made. Data was gathered at the UPC level (universal product code), which meant one could measure not just that you were buying beer, but the beer category, style of beer, brand, pack size, and whether you bought it on sale or not. This was gathered across hundreds of categories totaling over $400 billion dollars in sales. (Comparable datasets were available around the world as well.) This was the world’s largest Rubik’s cube of consumer data, which Pirate Eddie used to discover this phenomenon.
Now, Sticking with our Pink Floyd analogy here, instead of trying to sell more The Dark Side Of The Moon records to more customers, you can actually grow revenues faster by selling more relevant products, services, and experiences to Pink Floyd Superconsumers in tangential and relevant categories.
This is a wallet share game, not a market share game.
Wallet share is about capturing more spending per customer.
Market share which is about capturing more spending in the category.
For the Pirates out there who like math more than music, think of Supers as the ultimate expression of lifetime value. The lifetime value equation often has these variables:
Frequency of purchase… Supers buy a lot and often!
Average gross margin per purchase… Supers are willing to pay a premium.
Years in the category… Supers have the highest category lifespan.
Churn/retention rate… This is very low at the category level for Supers.
Word of mouth… This is exponentially higher for Supers, who are the best evangelists.
Categories cross-sold… Super of 1 = Super of 9 categories
Most companies go through the first four variables, less go through the last two. This is where the Superconsumer drives the most value, but is often the least measured.
The signal for customer profitability and sales and marketing efficiency is LTV / CAC.
Lifetime value of the customer divided by customer acquisition cost.
When you prioritize spending the lion’s share of your efforts and resources educating and marketing to your Superconsumers, the lifetime value of your customers goes up (because your Supers spend more with you, more often) while simultaneously bringing your customer acquisition cost down (you’ve found your Supers, now you just need to give them more things to get excited about).
Numerator goes up. Denominator goes down.
And when you do this successfully, that’s monayyyyyyyy.
The MoviePass Debacle
When you don’t know who your Supers are, or if you don’t have a business model that incentivizes Superconsumer behaviors, you end up in a bit of a mess.
Sort of like what happened to MoviePass.
In 2016, a startup called MoviePass launched as a subscription-based movie ticketing service. The Verge summarized the business model by saying “the subscription plan offered users a movie ticket a day—access to films in any theater, in any market—for less than $10 a month, ensuring the company would spend most on its customers than they would pay to use the service.”
Said differently, MoviePass was (unknowingly) engineered to be the inverse of LTV/CAC. The company had one pricing model ($10/month), and as a result, LTV couldn’t go any higher. It was capped. There was no path for Superconsumers of movies to spend more, and more, and more (*Pink Floyd shout* MONAYYYYYYYY!). And yet, the company’s customer acquisition cost was infinity, because Supers can watch as many movies as they want.
On CNBC in 2018, Pirate Eddie called this the equivalent of “inviting Homer Simpson to a buffet business model.”
It’s all you can eat—which is what led to the company’s demise in 2019.
Had MoviePass used movie Supers as “loss leaders,” they might have been onto something.
If you’re a movie Super, what else are you probably a Super of?